Cisco rejigs its structure

In response to a number of major upheavals in the networking industry, Cisco Systems Inc. announced last month a restructuring of the company from its existing three lines of business to one core business with 11 business units.

Under the old organizational structure, San Jose, Calif.-based Cisco had three specific lines of business: enterprise, service provider and commercial. According to Andrew Sage, director of marketing at Cisco Systems Canada Co. in Toronto, the need for separate lines of business no longer exists. Consolidation in the industry has blurred the lines and many products are no longer only used by one business category.

“In a nutshell, what’s happened is we’ve consolidated our development and marketing efforts,” Sage said. Now product marketing and development are all under one organization. The new Cisco structure will contain 11 new business units, each focusing on one product area: access, aggregation, Cisco IOS technologies division, Internet switching and services, Ethernet access, network management services, core routing, optical, storage, voice and wireless.

Sage added that the idea behind the restructuring is to focus product development efforts on the fastest-growing and most profitable areas. The new structure doesn’t mean that Cisco is phasing out products that are only used by certain market segments. For instance, the core routing business unit has a service provider focus, while voice and wireless tend to fall heavily on the enterprise side.

The aggregation business unit has a service provider focus and specifically deals with carriers’ aggregation needs within a network, such as DSL and T-1, Sage said. Then it delivers them into the network using an optical connection. The access unit is focused on routers that access the public network. Its products are mainly targeted at corporate branch offices and small offices trying to connect to the Internet.

“The reason for the change is that in the past, the line of business structure was suitable because there were pretty different products that were coming out of Cisco for each of those three separate market segments – for service provider, for enterprise and for commercial. And as the Internet trend has been progressing. . .we’re seeing a convergence of the requirements for people’s intranets, for people’s extranets and for the public Internet,” Sage said. “They’re all sort of converging around IP and a certain set of functionalities, so the differences across those three separate lines of business have become less and less over time.”

Major corporate changes often mean there will be a turnover period that will see the farewell of a few higher-ups. Kevin Kennedy, who was the senior vice-president of the service provider line of business, left after eight years in a leadership position at the company. According to a company press release, Kennedy will become an industry and technical advisor to Cisco.

Sage said Cisco is expecting a management turnover of upwards of 10 per cent.

According to Dan McLean, director of enterprise networking services research at International Data Corp. (IDC) Canada, the changes in Cisco’s structure is an accountability issue and shouldn’t affect Cisco’s customers.

“I think their sense probably was that they were a pretty flat organization and that that wasn’t working for them, especially during these times when most definitely there are areas of business that are a lot more successful than others,” McLean said. He added that splitting up the lines of businesses into more business units will allow Cisco to more closely monitor and measure the success of particular areas of business.

Added Sage: “What we think it’s going to do, and what we expect it to do, is that it’s going to allow us to deliver a core set of features to our customers faster than we otherwise would’ve been able to do because we’re consolidating a lot of our resources.”